STEPHANOPOULOS: Should Judge Sotomayor be confirmed? What kind
of justice will she be? That debate this morning with Democrat Chuck
Schumer, the judge's guide through the Senate. And the Republican
Senate campaign chair, John Cornyn of Texas.

Then, GM becomes "Government Motors." But is that good for
America? That, the Sotomayor fight and the rest of the week's
politics on a special expanded roundtable with George Will, Jan
Crawford Greenburg, Gwen Ifill of PBS, Paul Krugman of The New York
Times, and Bush White House veteran, Ed Gillespie. And as always, the
"Sunday Funnies."

JAY LENO, HOST, "THE TONIGHT SHOW": If confirmed, she would be
the country's first Hispanic judge. In fact, her first order of
business, deporting Lou Dobbs. That's what she said today.

(LAUGHTER)

ANNOUNCER: From the heart of the nation's capital, THIS WEEK
with ABC News chief Washington correspondent, George Stephanopoulos,
live from the Newseum on Pennsylvania Avenue.

(END VIDEOTAPE)

STEPHANOPOULOS: Hello again. The political spin cycles twirl
faster than ever these days. It has been less than a week since
President Obama made his choice for the Supreme Court, but it seems
like Judge Sonia Sotomayor has already had public hearings.

Of course, the official proceedings are coming up. And for a
preview of that debate, we're joined this morning by two key members
of the Judiciary Committee, Republican John Cornyn of Texas, and
Democrat Chuck Schumer of New York.

And, gentlemen, welcome to both of you. Let me begin by putting
up the words that have caused so much controversy already this week
from Judge Sotomayor, from a 2001 law review article where she says:
"I would hope that a wise Latina woman with the richness of her
experiences would more often than not reach a better conclusion than a
white male who hasn't lived that life."

And, Senator Schumer, we saw Rush Limbaugh and Newt Gingrich call
it racist, but even President Obama said it was a poor choice of
words. You're going to be guiding Judge Sotomayor through this
process. How is she going to explain that statement to senators when
she meets with them this week?

SCHUMER: Well, I think the first thing she'll say is read the
whole speech, which was then published in a law review article. And
she makes it clear that while, of course, people's personal
experiences guide them, rule of law comes first.

And then, of course, we have what is really the gold standard in
judging a judge, an extensive judicial record. She has been on the
bench 17 years. More federal experience than -- more federal judicial
experience than any judge in a hundred years. And what has been clear
throughout her judicial experience is that she puts rule of law first.

And as long as you put rule of law first, of course, it's quite
natural to understand that our experiences affect us. I don't think
anybody wants nine justices on the Supreme Court who have ice water in
their veins. But you can't let that experience supersede rule of
law...

STEPHANOPOULOS: But did she...

SCHUMER: ... and she hasn't.

STEPHANOPOULOS: But did she tell you this was a poor choice of
words? Or will they stand by that statement?

SCHUMER: I think she'll stand by the entire speech. I think
that she will show that the speech, when you read it, says rule of law
comes above experience. And no one can ask for more than that.

STEPHANOPOULOS: But what about the sentence?

SCHUMER: Well, the sentence -- you know, the specific sentence
there is simply saying, that people's experiences matter, and we ought
to have some diversity of experience on the court. And I think that's
accurate.

STEPHANOPOULOS: Senator Cornyn, what's your reaction to that?

CORNYN: Well, of course, George, the concern is that above the
Supreme Court it says "Equal justice under law." And it's doesn't --
shouldn't make any difference what your ethnicity is, what your sex
is, or the like.

We would also hope that judges would be, you know, umpires,
impartial umpires. And, you know, the focus shouldn't be on the
umpire and what their sex or gender is, or their ethnicity. It ought
to be on the game. And here it's on the rule of law, I agree.
But it's not just her statements. It's the New Haven firefighter
case where she apparently ignored legitimate constitutional claims of
a number of firefighters, including an Hispanic who claimed
discrimination on -- because of the color of their skin. And now the
Supreme Court, I think, is poised to perhaps even reverse that.

STEPHANOPOULOS: Well, let's take a look at that. Of course, in
that case, Judge Sotomayor's court upheld a decision by the New Haven
-- the City of New Haven to throw out an employment test which had
been -- which a white a firefighter and others had passed, but they
were denied the promotion because the City of New Haven threw out the
test.

And, Senator Schumer, one of Judge Sotomayor's colleagues on the
court, one of her mentors, really, Judge Cabranes, who was appointed
by a Democrat, really scolded her in a dissent on that -- in that
case.

He said that she didn't deal with the core issues in the case.
And he went on to say: "Indeed, the opinion contains no reference
whatsoever to the constitutional claims at the core of this case.
This perfunctory disposition rests uneasily with the weighty issues
presented by this appeal."

Those are pretty stinging words.

SCHUMER: Well, bottom line is she was doing what Judge Roberts
-- or Justice Roberts called be "judicially modest," which is what we
want in judges. She was following the precedent of the Second
Circuit.

There were two cases, the Hayden case, and the Bushie (ph) case,
that made clear what the Second Circuit's opinion was, and she was
following it.

And secondly, she was simply implementing, allowing to go forward
what the elected officials in New Haven had chosen to do.

SCHUMER: You know, we hear all these claims we don't want
judicial activists, and that is true. We don't. Here, she was being
modest, following the precedent of her court, not overruling what
(inaudible) had been done. It would be quite different if New Haven
-- if she was overruling what New Haven had done. So I think she was
doing what a judge should do.

You can't have people say we don't want judicial activists, but
then when there is a case that they don't like, they say overrule it,
even though you're going outside the precedent of the law.

STEPHANOPOULOS: Let me bring that to Senator Cornyn, because if
you look -- you're talking about looking at her entire record, if you
looked not only at that case, but the judge's entire record in race-
related cases -- this has been done by SCOTUSblog, Tom Goldstein, a
Supreme Court scholar and lawyer -- and he shows that she's ruled in
about 100 race-related cases and rejected claims of discrimination and
bias 80 percent of the time. Doesn't that show that she's not
bringing personal feelings to bear in an improper way?

CORNYN: Well, George, what you'll see from our side of the aisle
during these hearings is members of the Judiciary Committee and
senators who are not willing to prejudge or pre-confirm any nominee,
but are committed to a fair process, and one that allows Judge
Sotomayor to explain what the context is for all this and what her
true feelings are.

I might say that's in stark contrast to the way Miguel Estrada
was treated, somebody who was on a path to become the first Hispanic
Supreme Court justice, and Clarence Thomas, somebody with a compelling
story like Judge Sotomayor, but who was subjected, at least in his
words, to a high-tech lynching.

So I think the most important thing that can happen here is,
everybody take a deep breath, calm down. Let's take our time, let's
review those 17 years of federal judicial history, and let's ask the
nominee some questions in a dignified Senate process.

STEPHANOPOULOS: Senator, let me bring this back to you
because...

SCHUMER: I just want to say, George, that John Cornyn is right
and deserves to be commended. When some, you know, sort of on the
hard right started saying she was a racist, or this or that, John
Cornyn said it was terrible. And our Republican senators, to their
credit, have not prejudged.
I think when they examine her long and extensive record, when
they see that she puts rule of record first, almost inevitably, when
they see that, yes, her experience is reflected, but Justice Thomas
talked about his experiences; Justice Alito talked about his
experiences -- I think she's going to be approved by a very large
majority.

STEPHANOPOULOS: Senator Schumer, how do you respond to this
charge of hypocrisy and double standards? You led the charge against
Miguel Estrada when he was trying to -- when he was nominated for the
appeals court. There were internal memos among Democrats, citing as
one possible reason the fact that he would be an Hispanic elevated to
the appeals court. Are you using a different standard for Judge
Sotomayor than you used for Mr. Estrada?

SCHUMER: Absolutely not, and let me explain why. First, Estrada
was never a judge, so we had no way to judge what his record would be
in the best way to judge it, cases that we had ruled on. And so when
we asked him questions, he said absolutely nothing. He said, I cannot
answer this question, I cannot answer that question. In fact, Judge
Sotomayor has answered more questions on hearings already, because of
her two confirmation hearings, than Estrada said. So we had totally
nothing to do on with Estrada.

What we said about Miguel Estrada is, if he talked a little bit
about his judicial philosophy, we could give him a fair hearing. He
absolutely refused. He had no record as a judge. The two standards
are like night and day.

Justice Roberts, Justice Alito, they answered questions far more
extensively than Estrada did, and I think most commentators said they
learned a lesson from Estrada, that you have to answer some questions
about your judicial philosophy, particularly when you don't have a
record as a judge.

CORNYN: Well, George, I think -- I take a contrary view, as you
might imagine. I think this is pretext. I mean, Miguel Estrada
immigrated from Honduras. He couldn't speak English, when he was 17
years old, came here, graduated from the two top schools in America,
and rose to the very top of the legal profession. And yet, he was
filibustered by Democrats who denied an up-or-down vote in the United
States Senate.

CORNYN: I'm not willing to judge one way or the other, George,
because frankly, we need to not prejudge, not pre-confirm, and to give
Judge Sotomayor the fair hearing that Miguel Estrada, and, indeed,
Clarence Thomas were denied by our friends on the other side of the
aisle.

SCHUMER: Let me say this, George. I think when my Republican
colleagues -- and I think they have approached this in an open-minded
way -- when they see her record of excellence -- she's legally
excellent -- of moderation. She is not a far left-wing judge.

SCHUMER: Businessweek said her record on business was moderate.
The Wall Street Journal called her mainstream. And then her
compelling history, I think she's virtually filibuster-proof when
people learn her record and her story.

STEPHANOPOULOS: Let me finish up with Senator Cornyn. Your
colleague, Republican Senator Chuck Grassley, has already said he
believes that she will be confirmed. Do you see anything standing in
the way of Judge Sotomayor's confirmation right now?

CORNYN: Well, there are a lot of important questions. We've
talked about some of them this morning. We need to know, for example,
whether she's going to be a justice for all of us, or just a justice
for a few of us. And, you know, this promise of equal justice under
the law is not just a motto emblazoned above the Supreme Court, this
is the standard. And indeed, by ignoring a genuine constitutional
issue about reverse discrimination in the New Haven firefighter case,
you know, the comments she made about the quality of her decisions
being better than those of a white male -- I mean, we need to go
further into her record to see whether this is a trend, or whether
these are isolated and explainable events.

STEPHANOPOULOS: And we'll be doing that. Gentlemen, thank you
both very much.

STEPHANOPOULOS: We're going to go straight to the roundtable.
So as our panelists take their seats, take a look at how two other
Supreme Court firsts grappled with the question of how their personal
experience affected their professional judgment.

(BEGIN VIDEO CLIP)

SANDRA DAY O'CONNOR, SUPREME COURT JUSTICE: Looking back over
time, I can't see that on the issues that we address at the court,
that a wise old woman is going to decide a case differently than a
wise old man. I just don't think that's the case.

CLARENCE THOMAS, SUPREME COURT JUSTICE: There's so many people
now who will make judgments based on what you look like. I'm black,
so I'm supposed to think a certain way, I'm supposed to have certain
opinions. I don't do that. You don't create a box and put people in
and then make a lot of generalizations about them.

(END VIDEO CLIP)

STEPHANOPOULOS: And with that, let me bring in our roundtable.
Joined, as always, by George Will; our Supreme Court correspondent Jan
Crawford Greenburg; Ed Gillespie, veteran of the Bush White House,
where you helped both Justice Alito and Justice Roberts in their
confirmation hearings; Paul Krugman of the New York Times, and Gwen
Ifill of PBS.

And, George, it does seem like the central question right now, to
what extent should and do personal experiences, feelings, instincts
affect judgment in the court?

WILL: Hard to say. The question is not are they important, but
is there a judicial obligation, is it part of the judicial temperament
to keep those in the background? The question is, she seems to have
affirmed what's called identity politics, which is a main proposition
and a subproposition. The main proposition is, that an American is or
should be thought of as his or her race, ethnicity, sex, sexual
preference, that that should define their political identity. And the
subproposition is, called categorical representation. You can only be
represented by someone of the same sexual, ethnic, racial group as you
are, because only they can understand or empathize with you. That is
of no relevance whatever to the court, however, because it's not a
representative institution.

IFILL: I guess I see it differently. I mean, I've spent the
past year talking to a lot of people, who got elected, elected --
black elected officials for a book, and all of them talked about
identity politics and defined it differently. They defined it as
being -- that being part of what you are, but not all of what you are.
And I think that's what the defenders of Sonia Sotomayor are trying to
say, which is that her point was, yes, what she is and what we all are
shapes us, but it's not all that shapes you.

I always take arguments like this and try to turn them on their
heads. And I never hear people say that for a white male, that it's
identity politics if he is shaped by his white maleness and by the
things that affected his life, and whether privilege affected his
life. That's never considered to be a negative. It's only considered
to be a negative when ethnicity is involved or race is involved or
gender is involved.

GREENBURG: Well, the problem, though, I think, for Judge
Sotomayor -- and obviously, we've seen this week in Justice Alito's
confirmation hearings, when he talked about how his life experiences,
being the son of an Italian immigrant, affected his thinking when he's
taking up immigration cases or discrimination cases.

But with Judge Sotomayor in that speech, she also said a line
before we got to the now famous line, and you played this clip from
Justice O'Connor, when Justice O'Connor was saying that I think a wise
old man and a wise woman judge will reach the same result. In that
speech, Judge Sotomayor says, I don't think I agree with Justice
O'Connor on that. So she's really going beyond life experience.

STEPHANOPOULOS: But I actually think that's less controversial
than the sentence that's gotten all the attention. I mean, has Judge
Sotomayor said reach a different conclusion than a white male, it
probably wouldn't have been a problem. But Ed Gillespie, let me bring
you in on this. A lot of studies have shown that who you are does
change. When you have more women on a panel, that does tend to change
how panels of judges deal with discrimination cases.

GILLESPIE: We are all shaped by who we are. We all bring that
to the table. I do think, though, the -- you know, the conscious
injection that you see, in a lot of her comments, of gender and race
is what is causing for concern. And not only -- a little different
with politicians, I think, our identity, than with a judge, and with a
Supreme Court justice for a lifetime appointment.

I disagree with my friends on the Republican side, some who say,
well, we should give her a pass because she's a Latina. I disagree
with those who say, well, she's racist because of these comments.
Neither of that is the right approach.

The fact is, you know, look, we can all, as Americans, be proud
that the first African-American president just nominated the first
Latina to the Supreme Court of the United States. But we need to ask
the tough questions.

And frankly, I don't think those questions are so much revolving
around race or gender as how did it end up that, seven of your cases
that went to the Supreme Court, six of them were overturned. That's a
legitimate question to ask.
STEPHANOPOULOS: Well, actually that was three out of six. But
that's not that exceptional, is it, for cases on the Supreme Court?

KRUGMAN: Yes, you know, what amazes me about all this is that
this was a speech, right? The famous line comes from a speech where
she was trying to be entertaining.

And, you know, have I -- I was thinking about this -- have I,
somewhere along the line, said something like, I like to think that
bright Jewish kids from suburban New York make the best economists? I
probably have, somewhere along the line. It doesn't mean anything,
right?

She's trying to makes a little bit of who she is...

(CROSSTALK)

(LAUGHTER)

KRUGMAN: But the judicial record shows nothing of this. The
judicial record shows a straight, mainstream careful judge. And this
is just crazy to be making so much out of this line.

STEPHANOPOULOS: Jan, you studied her opinions. What does -- if
you look broadly at her -- at her record, her judicial record, you
know, you saw, going into this, a lot of liberals were hoping the
president was going to appoint a firebrand. He was sending signals to
both sides.

GREENBURG: Well, they're pretty -- you know, she's an appeals
court judge, an experienced jump. They're pretty technical, a lot of
them. You know, you don't get a lot of those hot-button issues on
that New York-based federal appeals court, those social issues that
you see, kind of, out in the heartland.

So, you know, there's not a lot out there for Republicans, at
this point, to work with. We've seen a lot of discussion about a case
that's now before the Supreme Court that she was involved in,
involving these white firefighters...

STEPHANOPOULOS: The New Haven case we just talked about?

GREENBURG: New Haven -- and, so, you know, I think that one's
going to be, obviously, pretty controversial. But her opinion in the
-- her opinions that we've seen so far, there's not a lot in them that
we saw from some of the other potential contenders.

WILL: In the New Haven fireman case, however, the accusation is
not just that she came to a perverse conclusion or affirmed a perverse
conclusion, which was that, because fire department promotions were
denied equally to those who qualified for them and those who didn't
qualify for them, somehow, equal protection and equality under the law
was respected, but the accusation goes beyond that, which is that the
three-judge panel on the second circuit that, in the most perfunctory,
cursory, indeed unsigned way affirmed the lower court's judgment, did
so in a perverse way, that seemed to be trying to slip one by a
majority on the second circuit.

(CROSSTALK)

STEPHANOPOULOS: ... Tom Goldstein has also looked at that
question and says it's not that exceptional in these kinds of cases.
I think he says 24 out of 28 times, there have been unsigned opinions.

But let me look, also, Gwen, at what Jan was talking about, these
hot-button issues: not much of a record, at all, on abortion. In
fact, the one time -- or the two times that the judge ruled on
abortion, one time, she upheld President Bush's Mexico City family
planning policy. One time she ruled in favor of anti-abortion
protesters. And this raised some concern among...

IFILL: On the left.

STEPHANOPOULOS: On the left, pro-choice groups. Yet the White
House comes out and says, "We're comfortable with where she is."

IFILL: "We're confident she shares the president's philosophy,"
is what they're saying.

Is anybody as surprised as I am that abortion has been so little
an issue, when, for so many Supreme Court confirmations, it has been
the main first thing out of the box.

It's almost as if whatever -- it's identity politics, whatever
you want to call it, has taken its place as the litmus test issue.

I talked to people at the White House this week who said, you
know, it doesn't bother me at all that she doesn't have much of a
record on abortion.

(LAUGHTER)

They're perfectly happy to change the subject and have it move on
to something else. And well they should be, I suppose, except they've
got to be prepared to handle the something else.

STEPHANOPOULOS: But do you -- you know, and they say the
president is comfortable with her. But they say that he did not ask
her directly...

IFILL: You know what, that was a very clever thing. They were
asked whether he asked her and they said "he did not ask her in his
conversation with her."

In fact, it would have been malpractice if someone didn't ask
her. They had, maybe, 100 people working on vetting this woman. So
somebody somewhere (inaudible) every thing she did.

(CROSSTALK)

WILL: ... the "something elses."

IFILL: Yes.

WILL: Let me tell you three "something elses" that are going to
come up. She has said that campaign contributions are inherently,
kind of, bribes. Now, that would overturn campaign finance regulation
and -- and postulate whole new laws if she adhered to that.

Second, she has suggested that disenfranchisement of felons,
which is a state option, and most states, to some degree or other,
violates the Voting Rights Act. And the third, because of a subject
we'll come to in a moment; that is, gay marriage, same-sex marriage,
they're going to want to know if that is an equal protection question.

STEPHANOPOULOS: Is that what you think, Ed, that Republicans are
going to go, here?

What kinds of questions do you think are going to draw the most
attention?

GILLESPIE: Well, I think -- I actually think Bush will come up
in the hearings, obviously. And I think, where the media's
concentration has been, over the past week, and where the hearings
goes could be two very different things.

And I do think they will probe, in terms of whether or not this
notion of empathy, you know, is going to be brought in to bear. How
much do you, you know, of your own personal feelings, do you bring
into your judgment as a -- or would you, as a justice on the Supreme
Court.

And I think the challenge for Republicans is going to be, at the
end of the day, would they adopt the standard that Democrats apply to
particularly Justice Alito and say, well, he may be qualified in terms
of intellect and experience and judicial temperament, but we disagree
with where we think you may rule, down the line, and 40 out of 44
voted against, breaking from, you know, kind of, an historic standard
that, well, elections have consequences and presidents should be able
to nominate, unless there's...

(CROSSTALK)

STEPHANOPOULOS: ... the fact that then-Senator Obama joined the
filibuster of Alito.

GILLESPIE: Right.

STEPHANOPOULOS: Here's how explained it back in 2006.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: I will be supporting the filibuster
because I think Judge Alito in fact is somebody who is contrary to
core American values, not just liberal values.

(END VIDEO CLIP)

STEPHANOPOULOS: So, Paul, the Democrats really did change the
standard, there, and that opens up, kind of, a free no vote for
Republicans, if that's the way they want to go?
KRUGMAN: Well, except, you know, the real story of this whole
thing has been the sheer craziness displayed by a lot of the
Republican Party. I think the Republicans have got a real problem
here. Because, if they do go no, they're going to seem to be the
party of Rush Limbaugh, the party of Newt Gingrich, the party of
completely crazy accusations against someone who is, after all, a
highly respectable, very smart, middle-of-the-road jurist.

STEPHANOPOULOS: You guess that's the way they're going to go?

GREENBURG: Well, yes, I think they're going to take the long
view. They know this is not the last nomination that Barack Obama is,
you know, going to be making to that Supreme Court. And this
nomination's not going to change the Supreme Court. That's not why --
that's why we're not seeing, I think, abortion, at this point, being
such a big issue.

But I think, at the end of the day, you know, when we look back
on all this, and we're talking about the filibuster and the Democrats
successfully filibustering during President Bush's tenure, all these
nominees like you talked about, Miguel Estrada, Republicans have only
themselves to blame -- not only for the Miguel Estrada filibuster, but
for Sonia Sotomayor, because it was failures -- and I covered all this
at the time -- complete failures of leadership in the Republican
Senate, led by Bill Frist, that allowed Democrats to start off these
historic filibusters in the first place, back in '02 and '03, which
then led, of course, to, you know, as we saw, Miguel being -- Estrada
being blocked. He would be the first Hispanic Supreme Court justice
if Democrats hadn't prevailed.

GILLESPIE: That's an interesting take to blame Republicans for
Democrats filibustering nominees for the first time...

(LAUGHTER)

... and especially when the memos came out that showed it was a
conscious effort to block minority nominees, particularly in Miguel
Estrada's case, for fear that President Bush would then make him the
first Hispanic nominee to the Supreme Court, very crass political
maneuver.

GREENBURG: But Democrats -- right. Democrats knew that. And
they recognized it was a lot easier to block these guys when...

(CROSSTALK)

GILLESPIE: It's very much easier to block it, so I don't think
it's fair to blame Republicans for Democrats blocking it.

And I do think, though, going back to the point, look -- to
Paul's point -- 35 out of 44 Republicans in the Senate voted for
Justice Breyer; 40 out of 43 who were present at the time voted for
Justice Ginsburg.

The Democrats are the ones, if Republicans vote against this
nominee on philosophical grounds, as President Obama, then Senator
Obama laid out his rationale for opposing; he didn't agree with the
values of that person -- not didn't agree with the temperament or the
intellect or the experience. They have set that standard. And I
think, unless -- if Republicans don't, we're sending up an inexorable
move to the left on the Supreme Court, and I think that's a very
serious consequence.

STEPHANOPOULOS: We're going to have to end on that note, right
now. We're going to come back in just a minute. We're going to have
more roundtable after the break.

Big question: Is "Government Motors" good for America?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: The question we ask today is not whether our government
is too big or too small, but whether it works.

OBAMA: I know that if the Japanese can design an affordable,
well-designed hybrid, then doggone it, the American people should be
able to do the same. So my job is to ask the auto industry, why is it
you guys can't do this?

OBAMA: We want to get out of the business of helping auto
companies as quickly as we can. I got more than enough to do without
that.

OBAMA: Just last week, "Car and Driver" named me auto executive
of the year.

(LAUGHTER)

(END VIDEO CLIP)

STEPHANOPOULOS: Who knows, by next year, that may actually be
true. Let me bring our roundtable back in. George Will, Jan Crawford
Greenburg, Ed Gillespie, Paul Krugman, and Gwen Ifill.

And George, the president has said -- you saw the contradictions
there. He wants to get out of the business as quickly as possible.
He also wants to urge the auto industry to move in the direction that
he thinks is good for the country. And as of tomorrow, most likely or
in a couple of months, once it's all completed, the United States
government, along with Canada, will be a 70 percent owner of General
Motors.

WILL: Yes. $20 billion in so far, perhaps $50 billion more to
come. The president will be long into collecting Social Security
before General Motors pays all this back, if it ever does, which I
sincerely doubt.

Why are we doing this? We're doing this because it is too big to
fail. First, big. Harley-Davidson has a market capitalization eight
times larger than that of General Motors. In what sense is it big
anymore?

Fail? A year ago, in the second quarter of 2008, it was losing
$118,000 a minute. It has failed. The question is what you do about
it. It seems to me the point of capitalism, which is a profit and
loss system, is to clear away things like Chrysler and General Motors.

STEPHANOPOULOS: The White House would argue that they had to
step in, because even though the numbers you cite are correct, they
would say if GM goes into liquidation, 65,000 jobs lost immediately,
hundreds of thousands of jobs lost in collateral damage.

WILL: That's partly assuming, partly assuming that Americans
would stop buying American cars. They'd buy different cars, made in
America, most of them, using American parts mostly, sold to America.

KRUGMAN: OK. I think it's kind of telling that you're talking
about market cap. Of course, workers, not, you know, GM stock is
essentially worthless, which we knew. But there are still a lot of
workers there.

The thing is, we have a mechanism. Bankruptcy, Chapter 11. The
problem is that the mechanism won't work in this case. That's been
hashed over many, many times. The financial markets are still in
disarray, so the kind of special financing that firms in bankruptcy
get still won't be available unless the government stands behind it,
and people won't buy durable goods -- automobiles -- from a company
that they think has got only a few months to live.

So if you're going to do anything, you're going to have to have
some kind of packaged bankruptcy that has a lot more English on the
ball from the federal government than normal. That's what's happening
here. This is not seizing the commanding heights. This is trying to
sort of make bankruptcy work. Even odds that anything survives five
years from now, but that seems like an option we're taking.

STEPHANOPOULOS: And even odds, let's dig into that a little bit
more. The federal government drove a fairly hard bargain, we believe,
with GM. The overall labor costs are down to about the prevailing
labor costs in other parts of the industry. They've cut the number of
brands down from eight to four. What will it take for GM to be a
viable company in two years, as this plan envisions?

KRUGMAN: Well, first, auto sales have to come back up, which
they probably will. Even if the economy has only a weak recovery,
which is what most of us expect, the fact is, people are buying very
few cars right now. At current takes, it would take something like 20
years...

(CROSSTALK)

KRUGMAN: Yes, it would take something like 20 years to replace
the existing stock of autos at current rates of sale, right, so we
know that that's not going to -- we know there's going to be some
recovery. People will start buying more cars. That helps even if
they can even, you know, partially maintain their share.

It needs some general revival. It's not that hard to tell a
story where GM starts to have a positive cash flow. It's by no means
guaranteed. This is a company that spent several decades ruining
itself, so it's not easy. But it's not crazy to think that this might
work.

STEPHANOPOULOS: And this is a decision that President Bush, Ed,
in the White House in the final months, basically said he would allow
President Obama to make, because he gave the bridge financing to GM.

GILLESPIE: He did a bridge. And I have always felt that had the
-- you know, this come up in the first month of President Bush's
second term, rather than the last month of his second term, he would
have done something different. I think he would have made different
decisions.

STEPHANOPOULOS: Let them go under?

GILLESPIE: I think he would have -- my personal view is, had it
been a different time, he would have probably done a structured
bankruptcy, a debtor-in-possession type financing arrangement. But
didn't feel like it was fair to the institution of the presidency to
hand off to a successor in the last month of his presidency to make a
decision like that, and so he bridged this gap in a way that gave them
time to come back with a plan of restructuring of their own and allow
for the successor president to make his own policy decision. I think
it was the responsible thing to do, probably one of the toughest
decisions of his presidency.

STEPHANOPOULOS: Go ahead.

WILL: Well, two things. I mean, these things have ricochets
after you start into this business. First of all, General Motors
acceptance corporation gets itself declared a bank holding company, so
it's eligible for TARP. Immediately does two things after it gets $6
billion of taxpayer money. It offers zero percent, five-year loans of
products competing with Ford Motor Company products, thereby injuring
the most healthy company out there.

Then, it further lowers the credit score that you have to have to
get a GMAC loan. Now, what would we call this? I think we would call
those subprime auto loans. So you can drive away from your foreclosed
house that you bought with a subprime housing loan in a car you bought
with a subprime auto loan.

GREENBURG: But George, I mean, that is exactly right when you
think about these ricochet effects. I mean, you've got Ford now, the
only one of the big three that is not going to be controlled by the
government. So how then can you assure Ford is not made vulnerable by
letting GM or Chrysler have, you know, access to capital at virtually
lower...

(CROSSTALK)

IFILL: What does government control mean? I think that's the
thing that's really dawned on everybody this week, that when people
make jokes about Government Motors, but in fact, when the government
controlled 72.5 percent of a privately owned company in kind of a
shockingly -- shocking incursion into the private-sector company, does
that mean that President Obama has to sign off on a new car that they
decide they're going to build?
(CROSSTALK)

KRUGMAN: AIG is 80 percent government-owned, and it doesn't seem
to be any different, so I'm not sure...

(CROSSTALK)

GILLESPIE: It means it's better to be a union autoworker than it
is to be a bondholder at these auto companies, for one thing.

(CROSSTALK)

STEPHANOPOULOS: That's not that unusual. When the steel
companies went under, the government didn't get involved in that and
the unions were put at the front of the line there as well.

But, Gwen, I do think you raise an important question that they
have to wrestle with right now. The government is now going to be the
owner of General -- 70 percent owner of General Motors. But the
question is, what kind of an owner are they going to be? And, Paul,
everything we hear from Larry Summers and others are that the
government is not going to be micromanaging these decisions, but...

KRUGMAN: But don't we (inaudible) them to?

(CROSSTALK)

STEPHANOPOULOS: If they do, then you're not going to get a lot
of new investors who want to be in the middle of it all.

KRUGMAN: You could not have a more centrist economic team than
this administration has, right? These people are -- are -- have no
desire to control the commanding heights of the economy. Yes, there
will be some pressures, but you know, this, in a way, if you are
worried that the government is going to start, you know,
micromanaging, they're going to start using all -- using GM to pursue
all sorts of non-economic aims, the fact that the company is probably
going to be losing money hand over fist for a long time is going to be
a guarantee against that. They're going to be very eager to see this
thing become commercially viable, or at least lose less money.

I think your fears that this is socialism, you know, it's just
crazy. It's not going to happen, because they really don't want this
albatross around their necks.

STEPHANOPOULOS: They want to get out?

KRUGMAN: They want to get out as fast as they can.

WILL: Let me give you another ricochet effect. The government
is mandating smaller cars. The government wouldn't need to mandate
smaller cars if the public wanted them, so the government is mandating
cars the public hitherto has shown it does not want. That is an
incentive for Americans to keep the cars they are driving longer,
which will deprive Detroit of customers. Hence, we now have, to cope
with that ricochet effect, there's a move on Capitol Hill to have
something called cash for clunkers, where you will be bribed by the
federal government to buy a new car.

KRUGMAN: You know, CAFE standards, which is what this is all
about, mileage standards, fuel efficiency, that's about -- you know,
there is a huge market failure. Actually, a couple of huge market
failures, right? There is pollution, there's global warming, there is
oil dependence. So to say, well, you're forcing the public to buy
something it doesn't want -- well, you're forcing the public to
actually recognize the real costs of some decisions that it makes, not
taking those costs into account. There's nothing wrong with this.

IFILL: Why isn't that -- why isn't that nationalization? Why
not just call it that?

KRUGMAN: It's not nationalization. Look, there's lots of things
we would like to do. I'd like to burn coal in an open grate in my
house, maybe, you know, and add to the smog over Princeton, but I'm
not allowed to do that, because it does negative things to my
neighbors, right? And so you know, there's lots of things that the
government regulates, and this is one of them.

STEPHANOPOULOS: But isn't what's different here now is the
government's on both sides of the negotiating table? They have so
much power because they have such a large share?

(CROSSTALK)

GILLESPIE: Look at the recent history. I mean, it hasn't in the
past been very historically easy to get the auto companies to agree to
an increase in the CAFE. We just went up to 39 miles per gallon. It
was very easy this time for President Obama to bring the auto
companies in, for them to agree to that, because there's no leverage
here.

And I do worry, I think one of the broader threats to our economy
is, if you're going to supplant profit motive with political motives,
over time, we're going to have a much bigger drag on our economy. The
government is not the most efficient allocator of resources in the
American economy.

STEPHANOPOULOS: And that's the biggest dilemma facing the
administration, because you know, let's say GM has a plant in Cocomo,
Indiana. They say they want to move it to Buenos Aires. They say
they want to stay out of it. Will they be able to?

GREENBURG: Right, I mean, going back to your point and Gwen's
point, you know, are you going to outsource your manufacturing or
parts to South Korea or China, or are you going to mandate that it be
kept here? How is the government, you know, when it's controlling
these companies, is going to make those decisions, when it's kind of
weighing now, I mean, very competing interests in a political fight.

(CROSSTALK)

WILL: One of the government's recent interventions in industrial
policy is the ethanol industry. Now, the government, when it said
we're going to put all this corn in our gas tanks, did not intend to
cause food riots in Mexico, but it did.

KRUGMAN: This is a -- I've often said, if only the first
caucuses were in New Jersey instead of in Iowa.

(LAUGHTER)

Then we'd have some -- someone would require you to put diners in
your cars or something, but...

(LAUGHTER)

But, no, look, this -- but, you know, they're very aware of this.
is -- none of this would be happening if it wasn't taking place in the
middle of the worst economic funk since the Great Depression. Very
exceptional things happened. They're not indicative of where policy
is going to be for the next 20 years.

GILLESPIE: I -- think that's a -- that's a legitimate point
relative to the auto industry and the intervention here, obviously.
But, look, this is going on a number of different fronts: the health
care debate that's going on, right now, and the public option, a huge
intervention, again, into one of the biggest sectors of our economy.

KRUGMAN: The public option is about offering people a choice. I
mean, if people who are opposed to...

(CROSSTALK)

GILLESPIE: In the same way that autos were offered a choice and
the bond holders were offered a choice.

(CROSSTALK)

KRUGMAN: It's nothing like it. And it's...

WILL: Paul assumes that, once the political class gets a taste
for using American capital, broadly speaking, as a slush fund to buy
political advantage, it will forswear doing so in the future. I don't
believe it.
Paul, most of the -- most of the agriculture policies in this
country are residues of those put in place for the Depression
emergency. New York City lives under rent controls put in place for
the emergency of the Second World War. The Japanese have surrendered.
They go right on forever.

KRUGMAN: But this one is on budget. I think that makes all the
difference in the world. This is going to be a drain on the federal
budget at a time when this administration, because of its very
activism, really wants those dollars for things it really wants like
health care.

STEPHANOPOULOS: Which brings it back to health care. I want to
bring Gwen in on this. Ed brought up this idea of the public option,
where there's going to be a public plan to compete with the private
plans. That's a dividing line between Republicans and Democrats.

But so far, as this begins to be debated, this week, in the House
and the Senate, that is still a dividing line between Democrats and
Democrats.

IFILL: I'm quite interested, actually, in the atmospherics of
all of this. Because one of this things -- on health care, on GM, on
nationalization -- boo -- or whatever you want to call it...

(LAUGHTER)

... or even on the Supreme Court nomination, what this
administration has shown its ability to do is step up to it, say, oh,
that doesn't work; let's try it this way.

The difference between something like the public option or
something like rescuing a major American industry is you can't walk
away as easily as they like to walk away if they see something's not
working.

Politically, there's something to be said for them saying, oh --
you know, they look -- these guys look backwards as much as forwards.
And they say, ah, the last Democratic administration made this
mistake; let's do it this way.

Their problem is that the things that they prize now, the
domestic policies are things that they can't step away from once they
get what they've asked for.

So it's -- it's very complicated. It's one of the reasons why
people in this administration don't talk about it like it's a public
option. They try very, very carefully to define it differently.

STEPHANOPOULOS: I think that's what -- I think the White House
doesn't care whether they get it or not.

IFILL: They don't.

STEPHANOPOULOS: They just want to get something done. The
bigger question faced, George, is how to pay for it.
The OMB director, Office of Management and Budget director said
this is going to be deficit-neutral; we're going to pay for every
penny.

So far in these three months of debate in the House and the
Senate, they've rejected every idea, so far on the table, to pay for
it?

WILL: That's right. And in the process, they've been losing
revenue. It's been leaking. They had a certain number written in
from cap-and-trade. But in order to buy off certain states that were
going to be injured by cap-and-trade, they gave away things they were
going to sell and the revenues have declined.

KRUGMAN: Well, yes, it's a little hard. I mean, they can make a
very good case that, long-run, the thing saves money. But CBO won't
score it that way. So they have to do...

STEPHANOPOULOS: After 10 years?

KRUGMAN: Right. So they're going to have to do -- but, you
know, it's not actually all that much money. All of the studies I
know say that the cost of actually insuring the uninsured as part of
this -- the only place where this costs money is actually in providing
supplement to help the uninsured pay.

(CROSSTALK)

STEPHANOPOULOS: But that's between $600 billion and $1.2
trillion.

KRUGMAN: Well, you think -- yes, but think about it this way.
It's under 1 percent of GDP. It's not -- obviously, it's a big thing,
in terms of the way budget debates are done. But it's actually not a
big thing in terms of the larger picture on the budget.

There are questions about how -- you know, what's our debt
outlook going to be, 10 years, 15 years from now, are really barely
affected by -- by this.

It's just -- it's a big number if you look at it in the abstract.
If you look at it in context, it's not really a big thing, because the
uninsured are mostly relatively young and relatively healthy.

The expensive people have been under a single-payer system called
Medicare all along.

GILLESPIE: The notion of the savings, though. I just -- we've
never seen this before, and I don't think we're going to see it again.
And I have to give them credit at this White House. They're very good
at the stagecraft. And they bring in the health care industry and
they say we're going to save $2 trillion on health care expenditures.

STEPHANOPOULOS: Over 10 years?

GILLESPIE: Over 10 years -- and not a single detail about it.
It reminded me of the old Steve Martin routine. He said, I'm going to
write a book, "How to be a Millionaire." First, get a million
dollars.

(LAUGHTER)

First, you get $2 trillion.

(LAUGHTER)

GREENBURG: That was also, you know, I mean, in terms of what the
White House, I think, has been very good at is really setting some of
these priorities, you know, as Gwen was, kind of, starting off this
discussion, too.

I mean, you know, think about what we've been discussing this
morning, all the things that are on President Obama's plate. He's
wanting to make health care reform, kind of, his crowning achievement
this first year.

And that, of course, influenced, going back to the discussion
earlier, why he selected Sonia Sotomayor in the first place. You
know, his political...

(CROSSTALK)

GREENBURG: ... she was going to be almost impossible for
Republicans to oppose, as we're certainly seeing now. They're falling
all over themselves. So...

STEPHANOPOULOS: And it clears the path for health care.

GREENBURG: Yes.

STEPHANOPOULOS: One issue he wants to avoid is another one in
the news this week, gay marriage -- again, Proposition 8 in
California. The California Supreme Court upheld the ban on gay
marriage but allowed the existing marriages to be -- to stay in place.

And right after that, very strange bedfellows came out, David
Boies and Ted Olson. These were the two lawyers, opposing lawyers in
Bush v. Gore. They have joined together to challenge this ban. They
want to take the issue of gay marriage to the Supreme Court.

OLSON: Creating a second class of citizens is discrimination,
plain and simple.

BOIES: Our Constitution guarantees every American the right to
be treated equally under the law. There is no right more fundamental
than the right to marry the person that you love.

STEPHANOPOULOS: This was surprising. We've seen a lot of -- lot
of news in the last several months about gay marriage. But this one
probably surprised me the most, Ted Olson, long-term Republican lawyer
joining David Boies. And it's also created some unrest in the --
among groups who support gay marriage, because they say, wait, we
don't want this to go to the Supreme Court right now.
GREENBURG: That's what's been the most extraordinary thing, I
think. I mean, lawyers will take on a case. And obviously, they
believe in this issue or they wouldn't have done it. And they're
doing part of it, you know, at a cut rate.

But the groups on the left and the gay rights groups are
incredibly upset about this. They're like, we don't want your help,
Ted Olson and David Boies, because those groups recognize that they
don't have the votes right now on the Supreme Court. And you can do
real damage if you pursue a case and you lose.

The Supreme Court, in 1986, ruled that states could ban gay sex,
criminalize it. It took 17 years for the Supreme Court to overturn
that decision, which it did in 2003, in an opinion by Justice Kennedy.
There's no evidence that Justice Kennedy, who's, kind of, that, you
know, human jump ball up there...

(LAUGHTER)

... I mean, both sides are, you know, trying to get his vote on
this -- no evidence that Justice Kennedy is going to vote that there's
a constitutional right to gay marriage.

WILL: Thirty-six years ago, at a point when state after state
was moving to liberalize abortion laws, including California, signed
by Ronald Reagan, the Supreme Court yanked that issue out of
democratic debate and embittered our politics down to this point by
not letting a consensus emerge in the community.

And as we've seen by subsequent votes in California on gay
marriage, the consensus is moving toward gay marriage if they would
just let it alone. Let democracy work and settle this.

IFILL: Maybe this is the unity the president's been talking
about, to have...

(LAUGHTER)

... to have David Boies and Ted Olson holding hands and singing
kum-ba-ya. Who would have thunk it?

But I still don't know whether that -- whether their effort might
do the president a favor in that it takes it out of his hands. The
last thing he wants to do is talk about -- talk about looking back and
not wanting to reliving old mistakes. This is one of them. They
don't want to get back into that.

GILLESPIE: I -- I couldn't agree with George more. I mean, I
think this is clearly aimed at taking this to the Supreme Court, where
it's probably ultimately going to end up at some point, anyway.

But the fact is, this is being dealt with in a rather civil
manner in the states where there are debates over this and legislators
are voting on it or it's taking place in referenda. And if you take
it -- if you take it out of the hands of the electorate and allow for
-- don't allow for a civil discussion, and you impose it by fiat, I
think we'll live with it for a long time.

KRUGMAN: Well, like I say, it's a shocking moment. I agree with
George.

(LAUGHTER)

STEPHANOPOULOS: That's all we're going to have time -- we're
going to have to end with Paul Krugman and George Will agreeing on
something. You guys can continue this in the green room. And you can
get political updates all week long from me on Facebook and Twitter.